Blowing Their Own Horn: Will The World Cup Lure Investment Capital To South Africa?

By Derek Simon | June 16, 2010 AAA

With the 2010 World Cup currently underway and excited fans buzzing about the South African landscape like vuvuzela horns - those plastic instruments capable of unleashing 127 decibels of pure, unadulterated aggravation - now seems like a good time to discuss World Cup-related investment opportunities. After all, as the most watched sporting event in the world, the Fédération Internationale de Football Association (FIFA) World Cup would seem to be a great breeding ground for money-making ventures. FIFA estimates that the 2006 event final alone drew a "global cumulative audience of 715.1 million viewers," which is about 500 million more than watched "Avatar" during its initial theater run and 715.099 million more than watched "Gigli." (Find out about some profitable movies in Movie Genres That Make The Most Money.)

Everyone's Buzzing
Let's begin with those cursed horns. Clearly, they are as popular as they are annoying. Bloomberg noted that J Sainsbury Plc, the third-largest supermarket chain in the U.K., expected to sell their entire supply of 70,000 yard-long plastic vuvuzelas within the first week of the tournament.

"When we bought them, we thought 70,000 was a huge number, our buyer thought he was being quite bold," J Sainsbury Plc Chief Executive Officer Justin King was quoted as saying.

However, at just two pounds ($2.96) a piece, King admits that the vuvuzelas haven't significantly contributed to Sainsbury's bottom line, despite the fact that the company's stock has risen almost two percent on the London Stock Exchange since the World Cup kicked off on June 11.

Businesses Hoping For a Boost
Still, there is more to Cup-related products and marketing than gratuitous horn blowing. Mark Dickens, spokesman for United Parcel Service Inc. (NYSE:UPS) in Atlanta, told the Atlanta Business Chronicle that event sponsorships represent an "investment," allowing UPS "to showcase a wide range of our capability, that goes beyond what many people think of us."

According to the Chronicle, Atlanta is one of 18 American cities bidding to host the World Cup in 2018 and 2022 and is home to several existing FIFA supporters, like Coca-Cola Co. (NYSE:KO), which began sponsoring the World Cup in 1978.

Other businesses that hope to get a boost from the World Cup include Volkswagen, Toyota (NYSE:TM) and General Motors - three of the seven major car makers that have plants in Port Elizabeth, South Africa, this year's host city. With South African automobile sales down by more than 25% last year, the government's estimated $6 billion spending spree on World Cup-related infrastructure is sure to be greeted with enthusiasm - and possibly even wailing vuvuzela horns - by local auto execs. (Serious about playing the Cup? Check out The World Cup 2010 Portfolio.)

Does It Help The Economy?
But will all the spending help stem South Africa's economic woes and lure foreign investment capital, as many soccer supporters contend?

Rob Baade, president of the International Association of Sports Economists, doesn't think so. He termed the benefits of hosting the FIFA World Cup "fiction," noting that much of the spending ($1.6 billion to be exact) was to build and refurbish stadiums.

"There are lots of reasons to suspect that stadiums are not good investments," Baade told ESPN.com. "There are all these tradeoffs that generally lead to no positive impact from the stadium and in some cases a negative economic impact from them."

Because they are used infrequently, Baade claims stadiums don't form a "symbiotic" relationship with the community like, say, a popular restaurant, bar or other type of retail establishment might.

"If they're only occasionally used you can't expect that they're going to stimulate the kind of hotel and restaurant development some people expect," Baade said.

The Bottom Line
Of course, in the investment world, perception often trumps reality; if enough people believe that the World Cup will bring economic prosperity to South Africa, perhaps there is some validity in the claim. In the meantime, grab a Coke and enjoy the games. Oh, and get some earplugs too. (If you do a little sleuthing and stay flexible on which teams to follow, you can still enjoy all the excitement of live sporting events. Learn more in Money-Saving Tips For Sports Fans.)

Catch up on the latest financial news in Water Cooler Finance: The iPhone Launch, Buffett's Lunch And BP's Lashing.

You May Also Like

Related Articles
  1. Economics

    Profiting From China's Breakout: The ...

  2. Trading Systems & Software

    The Bloomberg Terminal: Step By Step

  3. Trading Systems & Software

    Bloomberg Vs Morningstar: Key similarities ...

  4. Trading Systems & Software

    Top Bloomberg Tools For Financial Analysis

  5. Although several may try to describe the U.S. stock market as “fairly priced,” value-oriented investors recognize the lofty premium for what it is.
    Stock Analysis

    Where Are Foreing Markets Compared To ...

Trading Center